Economy and Business Opportunities from Honduras

The economy of Honduras is based mostly on agriculture, which accounts for 14% of its gross domestic product (GDP) in 2013. Leading export coffee ($340 million) accounted for 22% of total Honduran export revenues. Bananas, formerly the country's second-largest export until being virtually wiped out by 1998's Hurricane Mitch, recovered in 2000 to 57% of pre-Mitch levels. Cultivated shrimp is another important export sector. Since the late 1970s, towns in the north began industrial production through maquiladoras, especially in San Pedro Sula and Puerto Cortés.

Honduras has extensive forests, marine, and mineral resources, although widespread slash and burn agricultural methods continue to destroy Honduran forests. Unemployment is estimated at around 28%. The Honduran economy grew 4.8% in 2000, recovering from the Mitch-induced recession (-1.9%) of 1999. The Honduran maquiladora sector, the third-largest in the world, continued its strong performance in 2000, providing employment to over 120,000 and generating more than $528 million in foreign exchange for the country. Inflation, as measured by the consumer price index, was 10.1% in 2000, down slightly from the 10.9% recorded in 1999. The country's international reserve position continued to be strong in 2000, at slightly over $1 billion. Remittances from Hondurans living abroad (mostly in the U.S.) rose 28% to $410 million in 2000.

Lack of resources, lack of arable land, and a small domestic market continue to impede economic progress in Honduras. Most significantly, Honduras lacks abundant natural resources; only land appears to be plentiful and readily exploitable. But the presence of apparently extensive land is misleading because the nation's rugged, mountainous terrain restricts large-scale agricultural production to narrow strips on the coasts and to a few fertile valleys. Honduras's manufacturing sector has not yet developed beyond simple textile and agricultural processing industries and assembly operations. The small domestic market and competition from more industrially advanced countries in the region have inhibited more complex industrialization.

Sectors

Agriculture

The Honduran government and two banana companies—Chiquita Brands International and Dole Food Company—owned approximately 60 percent of Honduras's cultivable land in 1993. The banana companies acquired most of their landholdings in the early 20th century in return for building the railroads used to transport bananas from the interior to the coast. Much of their land remained unused because it lacked irrigation. Throughout the 20th century, Honduras's agriculture has been dominated first by bananas and then to a lesser extent by coffee and sugar. Some development experts argue that government protection of corn, bean, and rice production by small farmers is a futile effort in the long-term goal of poverty reduction.

Natural resources and Energy

Mining, the mainstay of the Honduran economy in the late 19th century, declined dramatically in importance in the 20th century.

Fuelwood and biomass have traditionally met about 67 percent of the country's total energy demand; petroleum, 29 percent; and electricity, 4 percent.

Honduras has for many years relied on fuelwood and biomass (mostly waste products from agricultural production) to supply its energy needs. The country has never been a producer of petroleum and depends on imported oil to fill much of its energy needs.

Manufacturing

Textile exports, primarily to the United States, led the Honduran manufacturing sector. The maquiladora, or assembly industry, was a growth industry in the generally bleak economy.

Construction

Privatization of formerly state-owned industries through debt swaps also negatively affected construction as prices for basic materials such as cement increased and credit tightened. A major devaluation of the lempira added to the already high cost of construction imports.

Banking

The Honduran financial sector is small in comparison to the banking systems of its neighbors. The average annual growth rate of value added to the economy from the financial sector for the 1980s was the second-highest in Latin America, averaging 4 percent.

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